Ortigas & Co., Limited Partnership vs. Feati Bank and Trust Co.

L-24670 (December 14, 1979)

G.R. No. L-24670

94 SCRA 533
December 14, 1979
Facts:
Plaintiff is engaged in real estate business, developing and selling lots to the public, particularly the Highway
Hills Subdivision along EDSA, Mandaluyong, Rizal.
On March 4, 1952, plaintiff entered into separate agreements of sale with Augusto Padilla y Angeles and
Natividad Angeles over 2 parcels of land (Lots Nos. 5 and 6, Block 31, of the Highway Hills Subdivision). On
July 19, 1962 the vendees transferred their rights and interests over the said lots to Emma Chavez. The plaintiff
executed the corresponding deeds of sale in favor of Emma Chavez upon payment of the purchase price. Both
the agreements and the deeds of sale thereafter executed contained the stipulation that the parcels of land
subject of the deeds of sale shall be used by the Buyer exclusively for residential purposes. The restrictions
were later annotated in the Transfer Certificates of Titles covering the said lots issued in the name of Chavez.
Eventually, defendant-appellee acquired Lots No. 5 and 6 with the building restrictions also annotated in their
corresponding TCTs. Lot No.5 was bought directly from Chavez free from all liens and encumbrances while
Lot No.6 was acquired through a Deed of Exchange from Republic Flour Mills.
Plaintiff claims that the restrictions were imposed as part of its general building scheme designed for the
beautification and development of the Highway Hills Subdivision which forms part of its big landed estate
where commercial and industrial sites are also designated or established.
Defendant maintains that the area along the western part of EDSA from Shaw Boulevard to the Pasig River,
has been declared a commercial and industrial zone, per Resolution No.27 of the Municipal Council of
Mandaluyong. It alleges that plaintiff completely sold and transferred to third persons all lots in said
subdivision facing EDSA and the subject lots thereunder were acquired by it only on June 23, 1962 or more
than 2 years after the area xxx had been declared a commercial and industrial zone.
On or about May 5, 1963, defendant-appellee began construction of a building devoted to banking purposes
but which it claims could also be used exclusively for residential purposes. The following day, the plaintiff
demanded in writing that the construction of the commercial building be stopped but the defendant refused to
comply contending that the construction was in accordance with the zoning regulations.
Issues:
1. Whether Resolution No. 27 s-1960 is a valid exercise of police power.
2. Whether the said Resolution can nullify or supersede the contractual obligations assumed by defendant-
appellee.
Held:
1. Yes. The validity of Resolution No.27 was never questioned. In fact, it was impliedly admitted in the
stipulation of facts, when plaintiff-appellant did not dispute the same. Having admitted the validity of the
subject resolution, plaintiff-appellant cannot now change its position on appeal.
However, assuming that it is not yet too late to question the validity of the said resolution, the posture is
unsustainable.
Municipalities are empowered by law through Sec.3 of RA 2264 (Local Autonomy Act) to to adopt zoning and
subdivision ordinances or regulations for the municipality. The law does not restrict the exercise of the power
through an ordinance. Therefore, granting that Resolution No.27 is not an ordinance, it certainly is a regulatory
measure within the intendment of the word regulation under the provision.
An examination of Sec.12 of the same law reveals that the implied power of a municipality should be liberally
construed in its favor and that any fair and reasonable doubt as to the existence of the power should be
interpreted in favor of the local government and it shall be presumed to exist. An exception to the general
welfare powers delegated to municipalities is when the exercise of its powers will conflict with vested rights
arising from contracts. The exception does not apply to the case at bar.
2. While non-impairment of contacts is constitutionally guaranteed, the rule is not absolute since it has to be
reconciled with the legitimate exercise of police power. Invariably described as the most essential, insistent
and illimitable of powers and the greatest and most powerful attribute of government, the exercise of police
power may be judicially inquired into and corrected only if it is capricious, whimsical, unjust or unreasonable,
there having been a denial of due process or a violation of any other applicable constitutional guarantee.

Resolution No.27, S-1960 declaring the western part of EDSA from Shaw Boulevard to the Pasig River as an
industrial or commercial zone was passed by the Municipal Council of Mandaluyong in the exercise of police
power to safeguard/promote the health, safety, peace, good order and general welfare of the people in the
locality. Judicial notice may be taken of the conditions prevailing in the area, especially where Lots Nos. 5 and
6 are located. EDSA supports an endless stream of traffic and the resulting activity, noise and pollution which
are hardly conducive to the health, safety or welfare of the residents in its route. The Municipality of
Mandaluyong was reasonably justified under the circumstances in passing the subject resolution.
Thus, the state, in order to promote the general welfare, may interfere with personal liberty, with property, and
with business and occupations. Persons may be subjected to all kinds of restraint and burdens, in order to
secure the general comfort, health and prosperity of the state, and to this fundamental aim of the Government,
the rights of the individual are subordinated.

Case Digest: Ortigas & Co. vs Feati Bank & Trust Co.
Facts:

On March 4, 1952, Ortigas sold Lot 5 and 6, Block 31 of the Highway Hills Subdivision at Mandaluyong to
Augusto Padilla y Angeles and Natividad Angeles. The latter transferred their rights in favour of Emma
Chavez, upon completion of payment a deed was executed with stipulations, one of which is that the use of the
lots are to be exclusive for residential purposes only. This was annotated in the Transfer Certificate of Titles
No. 101509 and 101511. Feati then acquired Lot 5 directly from Emma Chavez and Lot 6 from Republic Flour
Mills. On May 5, 1963, Feati started construction of a building on both lots to be devoted for banking purposes
but could also be for residential use. Ortigas sent a written demand to stop construction but Feati continued
contending that the building was being constructed according to the zoning regulations as stated in Municipal
Resolution 27 declaring the area along the West part of EDSA to be a commercial and industrial zone. Civil
case No. 7706 was made and decided in favour of Feati.

Issue:

Whether or not Resolution number 27 declaring Lot 5 and 6 to be part of an industrial and commercial zone is
valid considering the contract stipulation in the Transfer Certificate of Titles.

Held:

Resolution No. 27 prevails over the contract stipulations. Section 3 of RA 2264 of the Local Autonomy Act
empowers a Municipal Council to adopt zoning and subdivision ordinances or regulations for the Municipality.
Section 12 or RA 2264 states that implied power of the municipality should be liberally construed in its
favour, to give more power to the local government in promoting economic conditions, social welfare, and
material progress in the community. This is found in the General Welfare Clause of the said act. Although
non-impairment of contracts is constitutionally guaranteed, it is not absolute since it has to be reconciled with
the legitimate exercise of police power, e.g. the power to promote health, morals, peace, education, good order
or safety and general welfare of the people. Resolution No. 27 was obviously passed in exercise of police
power to safeguard health, safety, peace and order and the general welfare of the people in the locality as it
would not be a conducive residential area considering the amount of traffic, pollution, and noise which results
in the surrounding industrial and commercial establishments.

Decision dismissing the complaint of Ortigas is AFFIRMED.